Vietnam Hydrochloro-flourocarbon Phase-Out Project, Stage I Redacted Report July 2019 Statement of Use and Limitations This Report was prepared by the World Bank Group (the “WBG”) Integrity Vice Presidency (“INT”). It provides the findings of an INT administrative inquiry (the “Investigation”) into allegations of corrupt, fraudulent, collusive, and/or coercive practices, as defined by the WBG for purposes of its own policies, rules and procedures (the “WBG’s Framework regarding Anti- corruption”), in relation to the WBG-supported activities. The purpose of the Investigation was to allow the WBG to determine if the WBG’s Framework regarding Anti-corruption has been violated. This Report is being shared to ensure that its recipients are aware of the results of the INT Investigation. However, in view of the specific and limited purpose of the Investigation underlying this Report, this Report should not be used as the sole basis for initiating any administrative, criminal, or civil proceedings. Moreover, this Report should not be cited or otherwise referred to in the course of any investigation, in any investigation reports, or in any administrative, civil, or criminal proceedings. This Report is provided without prejudice to the privileges and immunities conferred on the institutions comprising the WBG and their officers and employees by their respective constituent documents and any other applicable sources of law. The WBG reserves the right to invoke its privileges and immunities, including at any time during the course of an investigation or a subsequent judicial, administrative or other proceeding pursued in connection with this matter. The WBG’s privileges and immunities cannot be waived without the prior express written authorization of the WBG. 1 Background In November 2012, the Socialist Republic of Vietnam (“Borrower” or “Vietnam”) and the International Bank for Reconstruction and Development (“IBRD”) acting as Implementing Agency of a Trust Fund, signed a Grant Agreement. Among the financed projects was the Hydrochloro-flourocarbon (“HCFC”) Phase-Out Project, Stage I (the “Project”). The Project’s objective is to reduce Vietnam’s consumption of HCFCs by providing grants to companies that have used HCFC in the past, and are willing to switch to alternatives. The Project specifically focuses on companies that used bulk or pure HCFC in production. Eligibility for, and the amount of, Project grants depends on the beneficiaries submitting required documentation establishing their past use of HCFC in their operations, and the amount of their HCFC consumption. The Vietnam National HCFC Phase-Out Management Plan identified specific enterprises as possible Project participants; some of these were pre-selected to be beneficiaries of Project grants. Seven of these companies are the subject of this report. Methodology INT’s inquiry included a review of the relevant procurement documents associated with the beneficiary contracts. INT also conducted verifications with several international HCFC suppliers to authenticate some of the bulk HCFC consumption documents submitted by the beneficiaries in their grant proposals. In addition, INT conducted audits of grant beneficiaries, and interviewed domestic HCFC suppliers. Findings 1. Evidence indicates that seven beneficiaries misrepresented their past consumption of HCFC in their proposals, some providing false documentation in support of these claims. Evidence indicates that potential Project grant beneficiaries were informed that only companies using pure HCFC were eligible to receive grants, and that beneficiaries would need to prove their consumption of pure HCFC for two prior years through invoices and/or contracts showing HCFC procurement. Evidence indicates that, in their proposals for Project-financed grants, seven beneficiaries misrepresented their past consumption of pure HCFC in order to qualify to receive a grant, and supported these misrepresentations with various falsified documents including false delivery notes, false import contracts, and false invoices. 3 a. Company A and Company B Evidence indicates that, in order to qualify for Project-financed grant, Companies A and B misrepresented their past HCFC consumption in their grant proposals and submitted false HCFC delivery notes in support of those false claims. Company A told INT that it had misrepresented its past consumption of HCFC and provided false documentation—in the form of two false supplier delivery notes—to the Project Management Unit (“PMU”) in support of these claims. Similarly, when INT contacted the purported issuer of Company B’s delivery notes, the supplier indicated that the notes’ purported signatories were not on the supplier’s staff, and that the company seal on the delivery notes was not correct. b. Company C Evidence indicates that Company C misrepresented its use of HCFC in its Project grant proposal, and provided false “Entrusted Import Contracts” from a Vietnamese import/ export company in support of this false claim. Evidence indicates that these contracts were never executed, as the purported suppliers never supplied HCFC to Company C or the import/ export company. c. Company D and Company E Evidence indicates that Company D and Company E submitted false invoices for HCFC to support their claims of HCFC consumption. During interviews with INT, Company D indicated that it had used pure HCFC for the prior three years but did not have any documentation to prove this. Company D stated that, as a result, it fabricated invoices from domestic suppliers to submit with its Project grant proposal. Company D’s purported domestic suppliers also advised INT that they did not issue the invoices included in Company D’s grant proposal, and that they had never supplied HCFC to Company D. Similarly, when INT contacted Company E’s alleged HCFC supplier, the supplier advised INT that the invoice numbers on the submitted Inventory Slips were not authentic. Company E told INT that it had purchased HCFC on the local market and was unable to provide adequate supporting documentation for these purchases, as the grant proposal required. d. Company F and Company G Evidence indicates that Company F and Company G misrepresented their HCFC consumption in their Project grant proposals. Company F told INT that it had made this misrepresentation, and that it had provided false documentation to the PMU. Evidence indicates that Company F over- represented its purchase of HCFC. Evidence indicates that Company F represented that it had made multiple separate purchases, ranging between 20 and 75 tons of HCFC, at various points in 4 the prior two years, when, in fact, it had purchased only a relatively small quantity of HCFC, consumed only some of that amount, and sold the remaining tons. Similarly, in its Project grant proposal, Company G submitted copies of multiple “sales contracts” with a supplier from the prior four years. However, INT contacted these contracts’ purported supplier, and the supplier said that four of these nine contracts were fictitious. Company G also told INT that the four contracts were not done properly and could not be found. 2. Evidence indicates that a government employee advised Company A to overstate its past HCFC consumption in its Project grant proposal in order to qualify for a grant. Company A told INT that, in its initial draft proposal to the PMU, Company A had represented that in one year, it had consumed less than 25 tons of HCFC in pre-blended polyol. However, according to Company A, a government employee advised it that it would not receive a Project grant with this level of HCFC consumption. Evidence indicates that the government employee then gave Company A guidance on what to state in its proposal to ensure qualification for a Project grant. Corrective Actions The World Bank has debarred the seven companies, extending to any entity they directly or indirectly control. 5